Retiring in Florida vs. Texas: Which State Taxes Your 401(k) Less?

"Neither state will collect state income tax, which means any 401(k) withdrawals, IRA distributions, pension payouts, and Social Security benefits are all untouched at the state level. The advantage shared by both states is also what makes this comparison all the more interesting. If neither state takes a cut of your retirement income, then the real question isn't about your 401(k) at all."

"Property taxes, homeowners' insurance, sales tax, and everyday living costs are where the differences really start to show, and for retirees living on a fixed income, these differences can make all the difference for your budget. Both states still rely heavily on other revenue sources to fund schools, roads, and public services, and without income tax revenue, this burden gets pushed onto property owners, consumers, and, in some cases, specific industries."

Florida and Texas both attract retirees by offering no state income tax on retirement income sources like 401(k)s, IRAs, and Social Security benefits. This shared advantage eliminates the most obvious tax comparison between the states. Since neither state collects income tax, they rely on alternative revenue sources including property taxes, homeowners' insurance, sales taxes, and other consumer costs to fund schools, roads, and public services. For retirees on fixed incomes, the meaningful financial differences emerge in these alternative tax structures and everyday living costs rather than retirement account taxation.

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